A HOMEOWNER felt like a prisoner in her own home after securing a super-low interest rate.
Historically low interest rates were one of the best things to come out of the pandemic, but some homeowners are now experiencing a phenomenon known as the golden handcuff effect.
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Sue Smith, who is self-employed in the investment industry, refinanced her Nyack, New York home in April 2022.
She originally applied for the loan in the summer of 2021.
The owner of the Empire State said Fortune It was the “perfect time” to refinance, as she was able to secure a fixed rate of 2.25% for 15 years.
Before refinancing, she had a 30-year fixed-rate mortgage below 4%.
Although she won’t be saving money on her monthly mortgage payment with her new rate, she may be able to pay off the loan sooner.
The $900,000 mortgage payment is about $5,895 per month, not including taxes and insurance.
When asked if she would consider selling her home as she approaches retirement, Smith laughed and told the outlet, “No, we’re prisoners.”
“We will never encounter this rate again,” she added.
Smith explained that even if she sold her home and moved for half the cost, “we would still be paying more on our mortgage… two and a half to three times more than we are paying now.”
This complicates her situation, as the New York owner said she hopes move as she approaches retirement.
However, it doesn’t make sense to sell her house since it is locked at such a low price.
She told Fortune she would consider using it as a rental property.
“You’ll never get that interest rate again, we’re not going to give up on that,” Smith said.
As of today, the average 30-year fixed rate is 6.92%, or more than double the Smith fixed rate, according to Nerd Wallet.
Current Mortgage Rates and Forecasts
Mortgage rates for all types of mortgages continue to gradually increase, according to the latest data shared by Forbes.
On April 26, the average rate for a 30-year fixed mortgage increased to 7.75% from 7.65% on April 25.
The current average rate for this mortgage in April is 7.71%.
However, economists have predicted that over the course of the year, mortgage rates will fall.
But before homeowners and buyers breathe a sigh of relief, the drop is not expected to be dramatic.
“The Federal Reserve has indicated that there will likely be cuts to the short-term federal funds rate in 2024, which will put downward pressure on mortgage rates,” said Bright MLS Chief Economist Dr. Lisa Sturtevant.
“Overall, however, rates are expected to remain above 6% throughout [2024].”
Meanwhile, First American Deputy Chief Economist Odeta Kushi said there will be “modest declines in mortgage rates” and the “journey toward [lower mortgage rates] can be slow and unstable.
The 15-year fixed rate is currently 6.09%.
Redfind Chief Economist Daryl Fairweather told Fortune that high interest rates are having a negative impact on the housing market.
“High interest rates are restricting both purchases, obviously because people can’t afford these higher mortgage rates, and sales because homeowners want to maintain their low interest rates,” Fairweather said.
“There are fewer buyers and also fewer sellers, but the decline in buyers is what is driving prices down and the combination is what is contributing to the decline in sales.”
Smith is not alone in his struggles.
John Dealbreuin of San Francisco, Calif., said he retired at age 44 and that a change in family plans made him reevaluate his home.
He wanted his parents, aged 78 and 83, to move out of India and live with him, he said. Wall Street Journalbut I needed a bigger house for that to happen.
Its rate of 3.3% was significantly lower than the current average rate.
Unlike other homeowners facing so-called golden handcuffs, Dealbreuin found a workaround that allowed him to keep the home and the low mortgage rate.
He built a small 300 square foot house in his garden for his parents to live in, but admitted he would have preferred them to stay inside their own house.
This story originally appeared on The-sun.com read the full story
